There can be several reasons for wanting to pay off your car loan earlier than the tenure for which you took it. If interest rates have fallen, you may be feeling the pinch of paying a high car loan interest rate. Your EMIs may be feeling like a huge burden on your resources and you wish to get rid of it. Or, you may have come across a lucrative investment avenue, and may be tempted to finish your car loan and divert the money you would thus save every month and invest in it. Here are some tips on how you can prepay your car loan:
Rent Your Car Out When You Are Not Using It
If you are working five days a week and your car is lying idle for the remaining two days, you could rent it out to raise some extra money and set it aside in a fund for prepaying your car loan. EMIs on loans usually comprise of a higher component of interest and lesser principal in the initial stages, whichchanges as the tenure of your loan progresses. This means that the earlier you repay your car loan, the lesser interest you will be shelling out on it. Conversely, it would make no sense in prepaying your loan if, say, if you have already finished paying 75 percent of it, because by that time you would have already paid most of the interest on the loan. You could benefit by using an online car loan calculator to see how much your car loan interest rate is and whether you would really benefit by prepaying your loan.
Pay an Extra EMI Every Year
Save diligently from your earnings so that you can make an extra EMI payment at the end of the year. Or split your monthly instalment in two parts and pay every fortnight, instead of paying monthly. Use the online car loan calculator to find out what difference it would make to your loan overall, and you will see that, by paying half of your EMI fortnightly, you end up paying 13 monthly instalments, one EMI more than the 12 you would otherwise pay in a year. Your car loan would thus finish much earlier than scheduled.
Paste Advertisements on Your Car
Make your car a mobile billboard. You can charge the advertising companies whatever charges you deem fit and raise some extra cash from your car to pay up your car loan early. But remember, the advertiser may insist that you install a GPS system in your car so they can track how many kms you drive every month.
Grab an Instantaneous Loan of Rs 2 Lakh from PaySense
PaySense has make it very easy to raise Rs. 2 Lakhs instantly in the form of a loan on their web and mobile apps. These apps are very easy to use, and once you make an application, the money is transferred to your bank account on the spot.